Yesterday, just days after witnessing the financing rounds of online shoe retailer Lamoda.ru and travel site Onetwotrip.com, the Russian Internet scene saw another giant funding operation with Ivi.ru, a major video streaming service.

Launched in 2010, Ivi.ru makes more than 97% of its content available for free, but a small part of its content is reserved for the paid subscribers of its ‘ivi+’ service, which was launched earlier this year.

Judging by its monthly traffic, Ivi currently ranks 4th among Russian free video platforms. Last July, according to TNS, it attracted 8.1 million users aged between 12 and 54 residing in large Russian cities, including 4 million users who watched Ivi’s clips from partnering sites.

That same month, Youtube served over 23 million Russian users, according to the same source. The audience of Rutube, initially a Russian copycat of Youtube but now developing a more specific approach, exceeded 13 million users, while Tvigle.ru approached the 10 million mark.

Among paid video sites are Now.ru, which belongs to Russia’s gas giant Gazprom, and Stream.ru (previously Omlet.ru), a property of LSE-listed holding AFK Sistema, which invested $15 million in the service last June.

Russian online video services have to cope with the competition of Vkontakte.ru (VK.com), the leading social network, whose users share – often illegally – a virtually unlimited amount of video content from all countries.

Big audience from big money?

The amount of Ivi’s latest financing round, and the site’s possible valuation, may seem disproportionately large given the size of Russia’s video advertising market, which has been estimated to be less than $30 million in 2011.

“The market is growing up to three-fold each year, driven by improvements in broadband coverage and a dramatic growth of mobile content consumption throughout the country,” Ivi.ru founder and CEO Oleg Tumanov said in an exchange with East-West Digital News. “In addition, there is a clear trend in favor of legal content and legitimate market players in the middle and long terms.”

“We are targeting, and we need to get prepared for, a market of another order of magnitude,” Tumanov added.

Ivi will use its funds to build out its technology, including mobile and Smart TV platforms, and enrich its content offer.

Tumanov declined to disclose any financial indicators.

The future will determine whether Ivi’s big money will easily translate into a big audience. While the site previously raised “several dozen millions” of dollars in investment, according to Tumanov, Tvigle reached its existing position – ahead of Ivi – with only $5 million raised in its early stages, four years ago.

East-West Digital News is the first international information company dedicated to Russian digital industries. Its website EWDN.COM provides news, market data, business analysis and updates pertaining to the Internet, e-commerce and mobile markets, software and hardware innovation, as well as to the related investment activity and institutional environment. The company also provides in-depth industry reports on these topics and organizes industry events.
A consulting branch, East-West Digital Consulting, provides international players with assistance for business development in Russia and advises Russian companies on their international strategies.